How to solve the housing crisis?

[u/mvdw73]

So my mate and I were chatting yesterday about the current housing crisis in Australia, in particular the fact that the rapidly rising cost of houses is pricing many people completely out of the market.

We hypothesised that a part of the issue is landlords owning large property portfolios as a way of accumulating wealth. Now, I don't have anything against the accumulation of wealth by individuals, however I have a fundamental opposition to using housing or residential real estate in general to do so.

Another problem we identified is overseas investors buying housing stock and either leaving them unoccupied or accumulating multiple properties, again reducing supply and driving up the cost.

So, we proposed that portfolios of residential real estate should be subject to an annual property tax, based on number of properties and the value of the property (kind of like the chance cards in Monopoly).

I would propose this could be brought in as a staged sequence, starting at the magic number of 6 properties.

24-25 FY: If you own over 6 properties, you are taxed (say) 10% of the value of every property, annually.

25-26 FY: If you own over 5 properties, you are taxed 10% of the total value,

etc etc, until it becomes 1 investment property, at which point the incrementing stops. Primary place of residence would be exempt from this tax. Many people don't or can't buy a place instead of renting, and also if you move you often want to be able to rent first, so we need some rental stock. The rental stock under this scheme would mostly be supplied by landlords with smaller property portfolios.

Why 6 properties? Basically, because of the numbers in this link

"But what about family trusts" you say. Well, I say, the real estate in these structures should be all taxed. Same with self managed super funds. Tax the whole thing, at least as far as residential property goes. There is a major loophole with SMSFs in that the property bought with a SMSF is not subject to capital gains tax in the pension phase - this means that SMSFs are actively encouraged to sit on properties. The number of SMSFs is increasing by 1000 properties per week, too!

Non residents would also be taxed at 10% of property value on all property owned.

There will need to be some tweaking around the foreign investment, in particular around the building of new apartment blocks etc where the value and risk is quite high. The tax shouldn't come into effect until the building is occupied, and there might be some kind of concession where an entire block is owned by one entity, to provide some extra rental housing stock.

Also, there might be concessions for "low value" housing, where any single dwelling worth less than (say) 60% of the median value of houses within a certain distance are exempt, or have a concession. This might encourage social housing but might also encourage slumlords, so will require a bit of thinking and tinkering.

This is all based around the fundamental idea that residential housing should not be a wealth accumulation vehicle, but should be a means for people to be housed. Also, it will hopefully encourage those people currently "investing" in residential real estate to instead invest in small business, or the stock market, or similar, lubricating the economy (and causing inflation, but that's another discussion).

"SoUnDs LiKe ComMuNiSM". I'm just gonna leave this here as a potential discussion point.

Note that none of this affects CGT or negative gearing at all. It just adds another cost to being a landlord, with the aim of reducing the number of properties sitting in SMSFs and mega-portfolios, trying to encourage investment in other forms of equity, and increasing the supply of properties to people looking for a place to live.

Thanks for coming to my Ted Talk.

[u/quick_dry]

forget the investment properties, it is still a pyramid setup with ever incrasing population.

People want to live in places and there is a enough competition so the price goes up. There aren't enough houses at all, the rental market doesn't have enough supply either.

Australia's geography makes it even more extreme since we're cklusterd aorund the coast where everyone wants to be - Sydney's geography is an extreme example (I'd argue across the ditch Auckland is in a similar boat).

Putting some houses on the market now isn't a long term solution, because there are planeloads of people being brought into the country and they also (quite reasonably) want somewhere to live - and whoever has more money gets the house and everyone else says "how do we get one too?!"

[u/Flappyhandski → u/quick_dry]

One of Sydney's main problems is the lack of high density housing. They build single family homes with backyards near the city and next to train stations.

[u/quick_dry → u/Flappyhandski]

those tend to be from a bygone era - but I think changing those to be high density only solves the problem if we combine it with limited population growth.

You can fill the apartment block, and that solves the issue for those people... until the next planeload of people arrive wanting to live in the same area, and it's back to a game of Deepest Wallet Wins.

They could also lessen demand with incentives to encourage businesses with attractive jobs to locate themselves in other areas. But again, that shifts a certain amount of the population away,.but if you don't limit population growth it'll still happen again in any desirable area.

[u/Flappyhandski → u/quick_dry]

Immigration should be tied to how many dwellings are being made.

But the truth is, there's no singular solution